Entrepreneurship inspires passion. It’s heady to see the elements of your education and experience come together in an energized vision. However, the details that make a real difference in your business success often reside in the mundane aspects of administration. Understanding the basics of business contracts can be characterized accordingly.
Today, contracts and agreements are essential to operating any business. While contracts can be verbal, agreements in writing better protect the interests of all parties. Handshake deals have gone the way of the Rolodex. Let’s look at the elements necessary to create a sound business contract.
A valid contract must be legally enforceable in a court of law in the event that a dispute arises among parties. The following essentials must be present for a contract to be deemed valid:
Offer and Acceptance. A specific offer must be presented and accepted.
Consideration. Value in the form of money or services must be exchanged between parties.
Mutual Consent. All parties must be willing to enter into the contract with free will and agree to the same terms.
Competence. Each party must be of a rational mind and sound body to understand the requirements within the scope of the contract. For example, minors and those under the influence of drugs or alcohol are not permitted to execute a contract.
Legal Purpose. The contract must have a purpose that is allowed by law.
Contracts are integral to formulating structure and organization within a business. In a written contract, the rights, responsibilities, and obligations of each party are clearly defined, thereby mitigating differing perspectives and/or misunderstandings. Additional sections and clauses may be included for a time frame of completion, contract violations, and termination provisions.
An executed contract is binding on all parties and provides you with legal recourse in the event of a breach of one or more terms.
The most consequential task of the contracting process is negotiation. The terms of a contract are defined through negotiation. A poorly negotiated contract can handcuff an organization with unreasonable liabilities for years. To negotiate the best terms and conditions for your organization, remember to:
Prioritize your objectives
Understand the motives and needs of all parties
Keep commencing terms basic
Break the whole into smaller parts
Support claims with research and evidence
Avoid emotions that can derail a win-win scenario
So Many Contracts
A myriad of contracts can be found for every conceivable business relationship. Legal guidance can help to determine what contracts are prudent and the best language to compose them in.
As you become more comfortable with contract terms and conditions, you can assume a greater role in creating them. It’s easy to do - a tool can help extract PDF pages that allow you to select components of one or more PDF files and insert them into a new PDF file. Contract wisdom is achieved through resourcefulness.
Contract Success Tracking
While contract negotiation may seem intimidating initially, with experience, this skill will become another valuable tool in your entrepreneurial toolbox.
Valuable business resources and networking opportunities can be found at your local chamber of commerce. Stop by and join today!